ReposiTrak (TRAK) Q3 2026 Earnings Transcript

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Date

May 14, 2026, 4:15 p.m. ET

Call participants

• Chief Executive Officer and Chairman — Randall K. Fields
• Chief Financial Officer — John R. Merrill

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Takeaways

• Recurring SaaS revenue mix -- Increased from roughly 62% of total revenue in fiscal 2020 to over 98% currently, following the conversion of more than $7 million of historical onetime revenue.
• Annual operating expenses -- Reduced from around $19 million (fiscal 2020) to approximately $16 million, while eliminating $6.4 million in bank debt.
• Net margin -- Expanded from about 8% several years ago to above 30% in the latest period.
• Net cash -- Grown from $13.7 million (fiscal 2020) to nearly $28 million by fiscal 2025, reflecting approximately 16% annual compound growth, and supported by debt elimination.
• Shareholder returns -- About $5 million returned via share repurchases, preferred redemptions, and dividends in the year-to-date period.
• Dividend growth -- The quarterly cash dividend has been raised 10% annually for three consecutive years since September 2022.
• Third quarter revenue -- Reported at $5.9 million, effectively flat year over year, compared to $5.9 million in the prior year quarter.
• Operating expenses (quarter) -- Down 12% to $3.6 million, from $4.1 million in the previous year’s quarter.
• Operating income (quarter) -- Increased 24% to $2.3 million versus $1.8 million in the prior-year period.
• GAAP net income (quarter) -- Up 1% to approximately $2 million; net income attributable to common shareholders up 4%.
• Effective tax rate -- Approximated at 18% for the quarter, with expectations to model roughly 20% going forward.
• Quarterly earnings per share -- $0.11 basic, and $0.10 diluted.
• Year-to-date revenue -- Grew 5% to $17.7 million, up from $16.8 million in the prior period.
• Year-to-date operating expenses -- Declined 4% to $11.7 million.
• Year-to-date operating income -- Rose 28% to $6 million from $4.6 million.
• Year-to-date GAAP net income -- Up 6% to $5.5 million; attributable to common shareholders, up 9% to $5.4 million.
• Year-to-date diluted EPS -- Rose 9% to $0.28 from $0.26.
• Cash balance and debt -- Ended the quarter with $26.4 million in cash, and no bank debt.
• Operating cash flow -- Generated $6 million in cash from operations for the first nine months of the year.
• Share repurchases -- 144 thousand common shares repurchased for $1.8 million this fiscal year at a $12.50 average price; since inception, 2.3 million shares for $15 million at a $6.60 average cost. No treasury shares are held; all are retired immediately.
• Preferred share redemptions -- 175 thousand redeemed this year, leaving 161 thousand outstanding.
• Patent portfolio -- Filed two new patent applications: one for touchless traceability, the other for correcting data integrity issues; total now at nine active U.S. patents.
• Touchless traceability adoption -- Two major customers (a leading grocery retailer and a leading wholesale cooperative in the South) achieved full end-to-end touchless traceability during the quarter.
• SPAR Group collaboration -- Entered a partnership to extend capabilities from diagnostics to in-store remediation; joint programs are in early development, with initial customer interest cited.
• Data accuracy challenge -- Error rates in supplied data initially range from 50% to as high as 70%, predominantly due to incorrect—not missing—data; company’s AI-based detection system is highlighted as unique in identifying and fixing these errors in near real time.
• Traceability revenue timing -- Revenue recognition lag identified for new traceability services, as implementations require significant onboarding time before new customer activity generates recurring revenue.
• Artificial intelligence initiatives -- Targeting increased automation and workflow efficiency through software modernization and selective AI-driven enhancements, with no significant anticipated increase in cash operating expenses or capital expenditures.

Summary

ReposiTrak (NYSE:TRAK) reported flat quarterly revenue as the prior year comparison included a one-time onboarding surge ahead of an FDA compliance deadline, affecting year-over-year growth optics. Strategic investment in platform-wide automation and intellectual property, including two new patent filings, positions the firm for regulatory-driven growth and differentiation in traceability. A newly announced partnership with SPAR Group marks a strategic step from identifying supply chain issues to enabling in-store remediation, supporting service expansion with joint go-to-market initiatives. Company statements claim proprietary AI systems achieve unique error detection and correction within supplier data, addressing industry data integrity gaps at scale.

• Randall K. Fields said, "Our lead in actually doing traceability has enabled us to create an AI based system that deals with this particular problem. No 1 else can identify and fix these errors."
• Company executives describe touchless traceability as "an AI powered self learning, automated solution to enable traceability" with zero manual product handling, emphasizing the competitive moat in FDA compliance readiness.
• Fields highlighted that the SPAR Group partnership bridges a critical industry gap by "move from diagnostic to remediation," with early customer response suggesting potential for material scale within six to nine months.
• The board authorized $6 million in remaining repurchase capacity, while management reiterated the immediate retirement of all repurchased shares.
• No significant increase in cash operating costs is expected from software and AI investments, per management guidance.

Industry glossary

• Touchless traceability: Automated, AI-powered process for tracking products through the supply chain using electronic data, eliminating manual scanning or physical handling at each stage.
• RTN (ReposiTrak Traceability Network): Company’s proprietary network infrastructure for supply chain traceability and compliance within the food and retail industry.
• FSMA 204: U.S. FDA Food Safety Modernization Act, Section 204, requiring enhanced traceability of high-risk foods under new regulatory compliance standards.
• SPAR Group collaboration: Joint initiative between ReposiTrak and SPAR Group to remediate in-store supply chain issues identified through diagnostics by providing on-site corrective action.

Full Conference Call Transcript

John R. Merrill: John, the call is yours. Thanks, Jeff, and good afternoon, everyone. As we close out the 2026 and head into the final quarter of the-- I want to spend a few minutes reinforcing the long term framework that continues to guide our execution, operating discipline, and capital allocation strategy. At ReposiTrak, our strategy has remained disciplined and consistent. We have remained focused on building a highly scalable SaaS platform characterized by recurring revenue, expanding operating margins, cash flow generation, and a conservatively capitalized balance sheet. At the same time, we have maintained a balanced approach towards reinvestment innovation, and direct shareholder returns. I believe our results demonstrate the strength and consistency of that operating framework.

First, our transition to a recurring SaaS revenue model has fundamentally transformed both the quality and predictability of our business. Since fiscal 2020, we have converted more than $7 million of historical onetime revenue streams into recurring SaaS revenue. During that same time period, recurring revenue increased from approximately 62% of total revenue to more than 98% today. Importantly, we accomplished this transition while simultaneously eliminating approximately $2 million of high touch low margin revenue opportunities that no longer align with their long term strategic direction. While those decisions reduce near term revenue opportunities, at that time, they create a capacity for higher value recurring revenue streams and position the company for sustainable long term margin expansion.

Second, we have remained highly focused on operational discipline and efficiency. Since fiscal 2020, we have reduced annual operating expenses from approximately $19 million to roughly $16 million while simultaneously eliminating 6.4 million of bank debt. At the same time, our profitability profile has improved significantly. Net margins have expanded from approximately 8% several years ago to north of 30% today. We believe this performance continues to demonstrate the operating leverage embedded within our SaaS model and the scalability of the underlying platform. Third, we continue to prioritize strong cash generation and disciplined capital allocation. Since fiscal 2020, net cash has compounded at approximately 16% annually. We define net cash as total cash less bank debt and lease obligations.

Net cash increased from approximately $13.7 million in fiscal 2020 to nearly $28 million by fiscal 25. Providing us with flexibility to invest in Spar Group while still maintaining a very strong liquidity position and 0 bank debt. We believe the SPAR investment aligns with our broader platform expansion objectives and has the potential to generate attractive long term shareholder value. The collaboration also supports our broader vision of extending our platform capabilities from supply chain intelligence into operational execution. Our capital allocation framework remains balanced between reinvestment opportunities and disciplined shareholder returns. During the current fiscal year to date period alone, we have returned roughly $5 million to shareholders through common share repurchases, preferred share redemptions, and dividends.

Since inception of our capital return initiatives, we have repurchased and retired a meaningful amount of both common and preferred shares. In addition, we have increased the common dividend 3 separate times by 10% each time since the program was initiated in 2022. Meanwhile, we continue investing selectively in long term strategic initiatives across 3 primary areas. The first area is product innovation. We are responding directly to customer pain with solutions designed to improve supply chain visibility reduce labor dependency, and increase data accuracy across increasingly complex distribution environments. Our touchless traceability initiative represents an important extension of the ReposiTrak traceability network or RTN.

We believe this solution represents a significant advancement in how FDA compliant traceability can be implemented efficiently and at scale across the global food supply chain. Second, we continue strengthening our intellectual property portfolio. During the quarter, we filed 2 additional patent applications. 1 relates directly to touchless traceability, while the second covers innovative methods for identifying and automatically correcting data integrity issues within integrated supply chain environments. ReposiTrak has a long history of protecting its innovation through patents and we now maintain a portfolio of 9 US patents further extending our competitive positioning and intellectual property portfolio.

Third, we continue modernizing our software architecture and internal systems infrastructure including targeted artificial intelligent initiatives intended to further enhance automation, workflow efficiency, and platform scalability. Importantly, we do not anticipate a meaningful increase in cash operating expenses or capital expenditures associated with these initiatives. Let's get to the numbers. Third quarter fiscal 26 revenue was $5.9 million, essentially flat year over year. Compared to $5.9 million in the prior year quarter. As a reminder, the March 2025 benefited from elevated traceability onboarding activity ahead of the original FDA compliance deadlines, which contributed to approximately 16% revenue growth during that period.

Following the FDA's extension of the FSMA 204 compliance deadline that accelerated onboarding activity did not at the same magnitude during the current year quarter. Despite this temporary timing shift in onboarding activity, we continue to deliver meaningful growth and profitability. Total operating expenses decreased 12% year over year to $3.6 million compared to $4.1 million in the prior year period. Income from operations increased 24% to approximately $2.3 million compared to $1.8 million in the prior year quarter. GAAP net income increased 1% to approximately $2 million while net income attributable to common shareholders increased 4% to approximately $2 million.

It is also important to note again that the company no longer benefits from significant net operating loss carryforwards to offset taxable income. During 2026, tax expense increased approximately 200% from prior year period representing roughly a $300 thousand increase. As a result, our effective tax rate was approximately 18% for the quarter and we continue to model an effective tax rate of approximately 20% going forward. Basic earnings per share for the quarter were $0.11 per share, while diluted earnings per share was $0.10 per share. Turning to year-to-date numbers. For the first 9 months of fiscal 26, total revenue increased 5% year over year to $17.7 million compared to $16.8 million in the prior year period.

Total operating expenses declined 4% to $11.7 million Income from operations increased 28% to $6 million compared to $4.6 million in the prior year period. GAAP net income increased 6% to $5.5 million while net income to common shareholders increased 9% to $5.4 million Year-to-date diluted earnings per share increased 9% to $0.28 per share compared to $0.26 per share in the prior year period. We ended the quarter with approximately $26.4 million in cash and 0 bank debt. Operating cash flow generation also remains strong. For the first 9 months of fiscal 26, the company generated $6 million in cash from operations. Now let me address our capital allocation initiatives in more detail.

During the fiscal year, we have repurchased 144 thousand common shares for approximately $1.8 million at an average purchase price of approximately $12.50 per share. Since inception of the buyback program, we have repurchased approximately 2.3 million shares for approximately $15 million at an average cost of roughly $6.60 per common share. We currently have $6 million remaining under the existing board authorization. Importantly, the company does not hold treasury shares Repurchased shares are immediately retired, further enhancing the long term accretive impact of the buyback program. During fiscal 26, we have redeemed 175 thousand preferred shares with approximately 161 thousand shares left outstanding. Finally, regarding the dividend.

On 03/20/2026, our board declared a quarterly cash dividend of $0.02 per share payable to shareholders of record as of 03/31/2026. This marks the 3rd consecutive annual 10% increase in the company's dividend since the program was initiated in September 2022. As we look ahead, our priorities remain unchanged. Disciplined execution, sustainable recurring revenue growth, continued profitability expansion, prudent capital allocation, balance sheet strength, and long term shareholder value creation. Our objective will remain straightforward, continue delivering superior value to customers, continue strengthening the scalability of the platform, continue generating durable cash flow, and continue executing with consistency and discipline over the long term. Thanks, everyone, for taking the time today.

At this point, I will turn the call back over to Randy. Randy?

Randall K. Fields: Thanks, John. This was a strategically important quarter for ReposiTrak. The progress we made and the differentiation we continue to add is vitally important to our future. In the quarter, we continued to fortify several of the competitive moats around our business through intellectual property protection, and an innovative new relationship. These actions are particularly important to mitigate any possible future threat from AI developed software. Importantly, our different business lines are now converging into a single platform of easily added high value applications for our customers. What we have and will continue to build is a platform that gives us and our customers significant operational and financial advantages.

I am going to spend a little bit of time on those. Through the lens of ReposiTrak in the age of AI created apps, creating a platform in which data is shared, errors are decreased, costs are minimized, and functionality expanded without additional implementation, is very compelling. We have meaningful capabilities already integrated into this platform. And we will continue to add additional capabilities to augment this end to end food safety and supply chain solution set. Increasingly, ReposiTrak is well positioned to identify and remediate issues from out-of-stocks on the shelves to helping to select the safest vendors for our customers, etcetera.

There is literally no 1 else that can do what we do end to end for our customers. No 1. Over time, we will continue to capitalize on that advantage. Most companies that have multiple applications as we do, actually have multiple different source code bases that they have to maintain. That means they have multiple development teams We have 1 source code base, 1 group of developers, and 1 very robust development environment. That enables us to be fast, in the development process, robust in avoiding bugs, and extraordinarily cost effective. From the lens of a customer, on the other hand, suppose you have an application that does work in, say, compliance.

Then you have an application that does work in the supply chain, obviously, addressing those same suppliers. And then finally, once you are doing traceability that also uses that same set of suppliers. Using ReposiTrak solution set, a critical advantage for the customer, is that having all of those functionalities in a single platform means there is only 1 place where the supplier list exists and is maintained.

If you have 3 different applications from 3 different software vendors, you will constantly be struggling to make sure there is only 1 accurate set of suppliers with the same set of contacts at those suppliers, etcetera. it is a very important advantage. it is important to note that this is also a wide moat with regard to AI coding. Small apps can often be built with an AI type tool. The truth is these AI created tools and other 1 off solutions are not going to deliver platform functionality and for the most part they have extreme security vulnerabilities.

Bottom line is that operating from a single platform gives us a less expensive, faster, less error prone, and far more secure environment for ourselves and our customers. So now let's go back and revisit the initiatives of the last quarter. The first significant strategic initiative was buttressing our intellectual property. We filed for 2 key patents around our touchless traceability solution, Please remember touchless traceability is an AI powered self learning, automated solution to enable traceability. We believe it is the only solution that can comply with the pending FDA mandate, let alone do that at scale and do it without adding significant cost to food items, or changing how a customer's distribution center actually works.

It is exactly what the name implies, touchless. Other systems require that cases be scanned or touched multiple times as they move through a distribution center. Touchless traceability requires none of that. We use electronic data to track products, not data gathered from manual scanning of boxes. Due to regulatory requirements, we elected to wait until the patents were filed before selling the solution. Nonetheless, selling that service is now commencing.

Keep in mind that the lag time for traceability revenue and customer implementation is longer than in our other services. it is very clear that the market interest and issues around traceability is growing, and certainly reinforces our belief that as the year progresses, the number of inquiries and new starts will increase. We are preparing for that. In the last 45 days, a leading grocery retailer and a leading wholesale grocery cooperative in the Southern US have achieved full end to end traceability using our touchless traceability solution. You may have noticed our announcements about those successes.

Believe it or not, there are still only 2 wholesalers or retailers that can track products from the supplier to their distribution center, and then onto their retail stores without ever having to touch the product or invest heavily into manual processes. Both of those companies are our customers using our technology. These successes will become an important part of our story in the next several years as the traceability deadlines approach. As I have discussed previously, the largest issue with continues to be the accuracy of supplier data. Garbage in, garbage out. The error rate in data we initially received from suppliers working on the system especially small suppliers, is at least 50% and as high as 70%.

An important fact, it is not simply missing data because that would be easy to identify. Meaning, you would look at a form and there is a field missing. it is not missing data. it is wrong data. That creates a very substantial risk that in the sense bad data is being passed from a supplier to his customer infecting that customer system, who in turn sends bad data to his customer, infecting that customer's system and so on and so forth, all the way through the supply chain. Interestingly, without our patent pending detection system, no 1 even knows these errors exist. But 1 day they will.

Our lead in actually doing traceability has enabled us to create an AI based system that deals with this particular problem. No 1 else can identify and fix these errors. It takes AI and learnings from millions of records to know that a current doc is actually incorrect. it is a little bit like the problem that I am sure all of you have experienced with spell check. If you use a word that is properly spelled but is incorrect contextually, spell check will not find it. For example, if you accidentally type the word tour, t o u r, instead of the word hour, o u r, spell check will not find the error.

This is where our service is, in fact, unique. While competitors try to find and fix errors manually, if they catch them at all, We are doing that automatically in near real time. Touchless traceability extends that to traceability itself. We mean it when we say touchless. Our second important initiative began last quarter with identifying a partner that can expand ReposiTrak's toolset from identifying issues to providing a human fix for those issues. Years ago, very large CPG companies had extensive field organizations that were able to go into stores and do what was necessary.

Those days are long gone, and importantly, now there are literally thousands of smaller suppliers that need this kind of assistance when an issue is identified. For example, how did they get a product they may have sent to a store, UPS, or FedEx? Out of the backroom and onto the shelf? Or what if sales data is indicating that the product is out of stock in store? What do they do to fix it? In short, there is an enormous number of opportunities to actually help suppliers and retailers fix not simply identify problems. Accordingly, we have formed a collaboration with the Spar Group to address the opportunity.

This collaboration also represents an enormous barrier in cases as obvious to the so called AI threat. AI can identify a problem on a shelf, AI cannot restock the shelf. AI can flag a recall. AI cannot pull the products. The bottleneck in retail is not intelligence. it is hands. Spar brings the hands. it is early, so I do not want to spend too much time on this, but we see a very interesting and important extension of our capabilities, not to mention any incredible defense against AI built tools. How will this relationship work? Well, we have gotten really good at identifying issues automatically, as you know.

We can identify out of stock situations as well as products that need to be removed from the shelves for various reasons, just to name a couple of examples. However, our focus has not and never has been on resolving the in-store problems we identify. Our limitation has been on the execution for the supplier or the retailer to enable them to fix the problem. The relationship with Spar could now close that gap. ReposiTrak can now identify an issue, and soon dispatch a trained team from Spar to restock the shelves, remove the updated merchandise, or address a recall. This relationship results in not only diagnosis, but the execution of the solution for a problem.

In our view, the very best defense is against an AI competitor. Are people, people meaning to do the work that AI has identified. The benefits are all around for this collaboration. The retailer still dealing with labor shortages does not have to devote any resource to fixing issues. The vendor benefits by increasing sales and keeping retailers happy. The retailer benefits by having full shelves happy customers and, obviously, higher sales. it is a big deal in an industry where margins are as tight as they are in retail. We have several programs in development, including new systems with this people added idea.

Over the next year or so, we will see if that idea has the legs that we currently think it does. We are doing all of this, bolstering our IP portfolio, improving our solution to continuing to evaluate. We can do better by doing, increase sales, reduce risk, and reduce expenses, not only for the customer, but for ReposiTrak as well. We have a lot more work ahead of us. it is all part of our model. And in the meantime, we are currently seeing excellent expansion of our supply chain business and the earliest stages of an acceleration in our traceability work.

Keep in mind again that there are lags on both of those between work and revenue, but we are certainly pleased with what we are seeing. So with that, I would like to now open the call for questions. Operator?

Operator: Thank you. We will now be conducting a question and answer session. Speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from Thomas Forte of The Maxim Group. Please proceed with your question.

Thomas Forte: Great. Thanks. Randy and John, congrats on the quarter. 2 questions from me. I want to start with the second 1. And I am thinking about the first 1. So, Randy, Agenda Commerce is a hot topic this quarter. It was discussed often in the mega cap tech calls, Amazon, Meta Platforms, among others. Randy, I consider you an expert on artificial intelligence given your background and experience. I would appreciate your thoughts on Agentic Commerce and what it may or may not mean in particular for the food retail category.

Randall K. Fields: Oh, nice question. Thank you, Tom. Look, there is a limitation, as I mentioned, in terms of food. For AI, Agentic commerce, or any of those ideas to actually provide very significant benefit. The advantage that retail grocers have defensively is their business is actually people intensive. It requires products to get ordered. Can that be done automatically? It all is already today. No major advances coming from AI. What else do they do? They take inbound trucks of products and put them into a distribution center. Any opportunity for AI in that? Very limited. it is a people and truck business. They move product through a DC to the end of the DC. Any opportunities for automation? Yes.

How did that work out for Kroger that just spent I do not know, 1 to $2 billion to do that and it did not work? The grocery business is already highly competitive, very, very effective, in terms of efficiencies, But you are at a stall point with regard to what AI ultimately can do. So in other words, in this interest in this particular industry, agentic commerce is an interesting thing to talk about, but it is not really going to be significantly impactful. We believe, and we have been doing AI, you know, for a long, long time, that we are close to that point where providing more insights as to what is wrong. Is not the issue.

The question is, how do you get this stuff fixed? So the answer we believe is what we are doing, as we mentioned, with an organization that has people that can get to stores and actually fix the issues. And someday, probably offline, I will tell you more about how we see this whole problem, if you will, of artificial intelligence. But hopefully-- Excellent. All right.

Thomas Forte: So for my second question, can you talk about so you have whet my appetite with the Spar Group news, but I am just gonna ask a simple question. So how can investors measure the success of the Spar Group partnership? What are the KPIs How can we measure the success?

Randall K. Fields: Well, 2 things. I mentioned that right now, for a whole variety of reasons, we have seen a substantial increase in our, inbound interest around what we call supply chain, scan based trading, things like that, things that touch products as are going into stores and distribution centers. At the same time that was happening, the opportunity with Spar presented, and we really did realize that there is this need to fix the problems, not just tell people about the problems. it is sort of like if you knew you had a problem with your car, now what? Now what? Well, the answer is you got to take it to a mechanic that is the hands to fix the car.

So we wanna move from diagnostic to remediation. And here's the way we think it will show up. it is too early for you to see the KPIs, but in about 6 months, we would expect to see the impact on us financially in terms of the relationship with Spar. But this is seriously what happens. We put together a joint presentation We have only been doing this a month. We went to a household name that everybody on this call would know, 1 of the largest consider them CPG drug companies in the world.

We presented this idea to them and in a single phone call, went from this has broad implication for how we could go to market with a whole variety of our products how do we accelerate this? I will be surprised if we do not end up with a deal. The deal with something like that is a deal at scale. it is not a $50 thousand a year deal. If it happens at all, it will be substantial. But that is the first prospect that we have exposed it to.

So it would appear that the idea, a priori, has tremendous legs and now we have to get out and do it, and the revenue should show up in 6 to 9 months. How's that? it is excellent. All right. So I apologize for not being able to my usual 4 or 5 questions, but I am juggling multiple calls. it is okay. Thanks for being on, Tom. You bet.

Operator: Thanks, Tom. There are no further questions at this time. I would like to turn the floor back over to Randy Fields for closing comments.

Randall K. Fields: Okay. Well, once again, thank you guys for joining us this afternoon. These 2 or 3 things, this opportunity that we are talking about in terms of remediation of problems, is potentially a very large opportunity for us. We like how traceability is going. We are getting more and more interest in it, that patent protection that we have created, we think, will funnel in the long run more and more business to us for traceability. So we feel good about where we are. Any questions, get back to John or Randy. And thank you guys for taking time. Have a good afternoon. Thanks for your time. Bye. Bye.

Operator: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines, and have a wonderful day.

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